Mazda to raise US$2B in share issue, loans

TOKYO: Japan’s Mazda Motor Corp plans to raise Us$2.1bil to shore up its finances and invest in a new plant in Mexico, a bigger-than-expected fundraising that sent its shares tumbling 10%.

The loss-making carmaker aimed to raise 100 billion yen (Us$1.3bil) through a public share offering and 70 billion yen through subordinated loans from banks, two sources with knowledge of the matter said.

“The company’s fundamental outlook is still very grim and at the same time there is a huge need for cash,” said Kojiendo, analyst at advanced research Japan.

“Even if they raise 170 billion yen, which sounds like a pretty big number, when they get done paying the bills, it could evaporate pretty quickly,” he said.

Battered by a strong yen, the nation’s No. 5 carmaker is set to post its fourth straight annual net loss in the financial year to March. This month it predicted red ink of 100 billion yen, much worse than an earlier estimate of a 19 billion yen loss.

Hiroshima-based Mazda, which makes the Mazda2 subcompact and the Mazda3 compact car, is the most exposed among Japanese carmakers to currency swings, building about 70% of its vehicles in Japan and exporting 90% of those last year.

To reduce its reliance on exports, Mazda plans to construct a plant in Mexico and renovate its Thai factory.

Other capital expenditure plans include the introduction of next-generation engine and transmission technology on all its cars by around 2016.

The share offering follows one in 2009, when Mazda raised 98 billion yen via a mixture of new shares and treasury stock.

One financial source said the new loans would be provided by Sumitomo Mitsui Financial Group, the statebacked Development Bank of Japan and other banks, adding that the announcement could come on today.

Mazda said in a statement that no official decisions had been made.